No Gains for Now
The GBP/USD pair gave up its average intraday profits to the two weeks and a half high and pulled back close to its daily low points. At the time of writing this, the pair was last observed trading close to the 1.3265 to 1.3260 zones, almost unmoved for the day and it had a low reaction to the published consumer price index of the United Kingdom.
GBP/USD price chart. Source TradingView
The pair was able to build on breakout momentum from the previous day from the high-end boundary of a trading range that spanned many days’ resistance and succeeded in gaining some follow-up tractions as trading opened on Wednesday. The overshadowing risk-on impulse of the market kept being a headwind to the US dollar as a safe-haven commodity, which then prolonged a measure of support towards the GBP/USD currency pair. There was, however, no bullish conviction in the intraday uptick and it failed before the 1.3200 benchmarks were achieved.
Rapid Rates Boost the US Dollar
That said, the latest run-up seen in the American Treasury bonds yield which was boosted by the possibilities of a quicker policy fastening cycle by the Federal Reserve has helped to limit further losses for the pair. Last week, the Federal Reserve had given signals that it could raise interest rates at all the remaining six policy meetings it has left this year. In addition to this, the Chairman of the Federal Reserve, Jerome Powell, gave a lead that the US central bank might also be adopting more aggressive responses to fight the persistent inflation rate.
Moreover, the President of San Francisco’s Federal Reserve, Mary Daly, observed that it was about time policy accommodations are removed whereas President James Bullard of the St. Louis Federal Reserve and President Loretta Mester of Cleveland Federal Reserve have both called for more rapid interest rates increases.
The markets rapidly priced in a 50 basis points interest rate increase at the coming Federal Open Market Committee meeting scheduled for May and it has pushed the American ten-year bond yield to the highest point it has been at as far back as 2019. It looks like this inspired US dollar bullish traders and went ahead to cap the GBP/USD currency pair.
Dealing with economic reports, the United Kingdom Office for National Statistics said that the Consumer Price Index rose to 6.2% year-on-year in the month of February from the initial 5.5% in the month of January. Whereas, the central Consumer Price Index moved to a 5.2% year-on-year rate in February as against 4.4% that came in for January.
It should be noted that the Bank of England now has a softer tone towards the need for interest rate increases in the future during its meeting last week.